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Sunday, June 20, 2010

E-minis (Sunday Night Edition) [Update 2:51PM]

[Update 3:04PM: Well never mind equities, we have been nailing that dollar chart huh?  Definitely some B? wave upside today it appears. That the market managed to stay somewhat sideways despite the dollar strength is notable.]

[Update 2:51PM: This would be the count of the chart I posted just underneath. I cleaned it up so you can it it.  Its a classic expanded flat and triangle combination separated by an (x) wave.  Anyways, the clear thing is that "e" of (y) of [b] cannot be breached in order for this count to be correct overall.

[Update 2:23PM: Here is a near term squiggle count on the SPX and the way I view things. I actually gave it a slightly differing count than the triangle the e-minis shows. All the alternates you see are a cover my ass projection cause its a bit hairy as Minor 2 has achieved a solid 50% retrace so far. Any further gains is just extra gravy.

(By the way the count I show below would be a combination for Minute [b] - expanded flat for (w), zigzag (x) wave, then a triangle (y) wave.)

But as long as 1115 holds, then the market's primary count is higher still in a wave (iii) of [c] of 2.

This chart does show near term support levels and what they mean:

1. 1115 breakout support. A close under this probably means an [a] wave of Minor 2 has peaked.
2. 1105 support. A close under this definitely indicates a [b] of 2 wave is in play or worse, Minor 2 is finished.
3. 1089 gap support.  A close under this is technically bearish. This would indicate a reversal of the "follow through" day. In that case it would be an excellent chance that Minor 2 had peaked.

[Update 8:24AM: The euro would be in a similar count to the dollar, just in the opposite direction.]

[Update 7:35AM: The dollar count has that a zigzag back to the Fib 23.6% has occurred.  Now an X wave back up partial retrace, should occur.  After that, likely another zigzag down to achieve a better price retracement of the entire rise up from November. (The Stockcharts chart shows A-B- C and not WXY - same difference you get the picture.)

[Update 7AM: The contrarian in me suggests that Canada's property bubble on the verge of popping.

Be very afraid when you see these kinds of statements:

"model economy" (yet debt is back to record levels)
"Our banks are better managed and we have better regulation"
"There was no mortgage meltdown or subprime crisis"

And here is the kicker:
"In Canada's concentrated banking system, five major banks dominate the market and regulators know each of the top bank executives personally."

Yes regulators getting cozy with top bank executives. Nope, no problem there! In fact its a design feature they are proud of!

[Update 6:45AM: Has there been at any other time where there was a "sure thing" in trading? I would think that most everyone and their little brother expects the Chinese yuan to gain in strength versus King Dollar.

Now initially that probably does happen a bit.  But as Mish Shedlock has asked, what if the yuan crashes against the dollar instead?

The key thing is that every fool on the planet knows the yuan will gain a lot against the dollar and how much is up to its government. But what does the market think in the longer run?  I suggest it won't perform as  Timmy G wants it to.  When everyone is looking in one know the drill.

[Update 6:23AM: I know its early, but if this is a [c] wave of 2, then it should have some kind of relationship with its wave [a] and in time (multi-day) to achieve the "right look". I reconfigured the triangle a bit which allows a wave (ii) of [c] deeper retrace but you get the picture.

For instance a calculation of [c] = [a] probably puts this in the ballpark of 1167-1169.  If [c] = .618 x [a] your looking in the ballpark of mid -1140's and there is resistance there.]

[Update 5:37 AM:  Backtest of the upper triangle line successful.  5 more waves up.  The best count still has this as a "kickoff" for Minute [c] of Minor 2.]

[Update 9:38PM: Could be a backtest of the upper triangle line.  It just reminds you what a stupid market this is.
The only real wildcard in the whole thing is that the $ looks like an ED wedge. Maybe the end of A of (2).  EDIT: Too many random thoughts.
Tonight's bullish up move is likely Minute [c] of Minor 2 "kickoff" event.  The [c] wave would consist of a 5 wave Minuette (pink labels) structure to Minor 2 peak.

Top alternate is that its Minute [a] of Minor 2 peak.

Good Luck! Going to sleep.

The primary wave count has the indexes completing Minor wave 1 down on 8 June in the form of an overlapping 5-3-5-3-5 leading diagonal count.  I postulate the SPX and Wilshire ended very slightly truncated (did not take out the wave [iii] of 1 low). The DJIA, Trans, NASDAQ, and RUT did not end truncated.

After leading diagonals complete, they can retrace in the opposite direction sometimes to 78.6% Fibonacci. Truncations indicate exhaustion and can also support a violent move in the opposite direction. So the leading diagonal coupled with truncation on the SPX and Wilshire (which is the entire market) supports a violent, potentially deep retrace Minor 2. This we must be prepared for as it is what the Elliott theory suggests strongly can happen.

Minor 2 up is likely to take the form of a 5-3-5 [a][b][c] zigzag as wave 2's typically take this form.  Wave 2's also typically retrace more than 38%.  From 45-72% can be considered "normal" with 50-62% quite typical.  At the end of Friday, the Wilshire had reached a maximum retrace of only 44.9% so far.  So we are beginning to hit minimum expected retrace targets but we suppose 62% or higher can certainly be hit.

I have also been suggesting, even before the market closed over it,  that if the 19:1 down candle produced on 20 May could be held as support, then the market is capable indeed of higher retraces. I showed on Friday that this candle has now been closed over for 4 straight days. The market also thought it was important as I suggested.

Additionally, the market produced a breadth thrust event that I blogged about here which led me to believe that Minor wave 2 would indeed likely be your typically deep retrace.

Since the Minor 1 low, efforts have been made to identify the [a][b][c] retrace structure. Specifically the Minute [a] top and the Minute [b] consolidation. As far as the [a] wave top we have several price points that can be candidates.  

As far as the Minute [b] wave consolidation wave, I have supposed the last few days the [b] wave was tracing but we were not sure if it was finished or not.  As of the end of Friday, we felt there were numerous possibilities (and I was thinking a quick burst down) and unfortunately only the market could let us know the final outcome. I feel it has let us know tonight. Tonight should be Minute [c] of Minor 2 kickoff. 

That brings us to Sunday's e-mini session in which a huge thrust up has occurred.  Any thrust move always makes me think of triangles.  And so it is, I now have the primary count as Minute [b] tracing a running-correction triangle.  This triangle actually shows very well on the e-minis. It includes the (d) wave as the one required complex leg. Additionally the (e) wave also traced its own mini-triangle which e waves seem to be doing a lot of since the 2009 lows. (again this doesn't translate well to the cash index as the last red candle of the (e) occurred in A/H's on the e-minis)
As far as the cash index, the triangle is less pronounced but when using the Wilshire as I do here, here is the basic gist of the proposed [b] wave running triangle.
If this interpretation is correct, what does this mean for the market going forward? 

1. It means that tomorrow morning, if futures stay elevated, the opening will "kickoff" wave [c]. Specifically we would look for a 5 wave structure of Minuette (pink) size to mark the price high of Minor 2 retrace up. I 

2. It means that Minute [b] wave a running triangle, high-level support consolidation. We have seen this recently at Minor size on the way up to P2 peak at 1219. The Minor B in that instance was a running triangle. Also note that the breakout retraced deeply in a Minute [ii] yet held from going under [e].

2A. The same holds true here.  In order for the market to clear above 1112-1115 resistance, it will likely have to thrust way up above that price in a wave (i) of [c] move. That way any wave (ii) retrace back (perhaps Tuesday?) will hold above 1114. 

3. If tomorrow is a kickoff move for wave (i) of [c] of 2, then wave counting rules apply. This means that Friday's "(e)" wave price low (1114.8 on the SPX) should stand firm on any attempt to close the gap up produced by the kickoff move.  So we suppose that any gap up will hold or offer support in some form or fashion.

4. Minute [c] should have some Fib relationship to Minute [a] in price and/or time.  So Minute [c] usually would take at minimum usually a few days at least to a week or more.   Only the market can decide and time is usually a function of sentiment. If sentiment "cures" and goes bullish in only a few days, then that could be enough. If sentiment remains too skeptical, the [c] wave will persist until the skepticism shakes out.

(So it will be interesting to see comments - these too are clues)

Ok, so what if we get our kickoff wave and the market reverses and closes either red or in a bearish manner? Well, we'd have to consider that some sort of bearish reversal.

1. The top alternate in the case of a bearish reversal in which my proposed (e) wave price point (1114.8 on the SPX) does not hold, then we could be looking at an [a] of Minor 2 wave high and then the [b] wave would occur. In this instance [b] would retrace a portion of the entire up move from 1042, and hold support.

2. The second alternate is that EWI's primary upward flat count would be playing out and Minor 2 would be complete altogether. In this case its bad for the market and Minor 3 down is in play.

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